For General Electric, 'how' of Q1 earnings may trump 'how much'

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General ElectricWhat a quarter it has been for General Electric (GE). Manufacturer of everything from light bulbs to nuclear reactors, it has seen its stock fall 25 percent so far this year -- and that's including a six-week-long surge in which it has nearly doubled in price. It has lost its vaunted "AAA" debt rating and given investors a glimpse into its huge finance arm, once the source of half the company's profits but more recently, the cause of may of its woes.

After all that, analysts expect GE to report a first-quarter profit of 21 cents a share tomorrow morning, less than half of what it posted a year ago. For investors, how GE gets there may be more important than the number itself.

Investors will likely inspect GE Capital's results closely. The company has said the unit will be profitable this quarter, but a one-time tax benefit deserves much of the credit for that. After giving the world a glimpse of GE Capital's books last month, CEO Jeff Immelt and CFO Keith Sherin may face some pointed questions if things have deteriorated.

Meanwhile, the outlook for GE's industrial businesses is mixed. Sales of some of the company's products, from jet engines to medical equipment, will likely fall as the recession forces its customers to cut back purchases.

But other units may prove more resilient. GE is a huge manufacturer of the turbines used in power plants, and demand for them has reportedly been relatively strong as utilities look to upgrade their equipment.

It may also benefit from provisions in the Obama Administration's economic stimulus package that encourage construction of high-speed rail (it's the world's largest maker of locomotives), renewable energy (it's also a big windmill manufacturer) and a more efficient electrical transmission network (see its ubiquitous "smart grid" ads featuring the Tin Man from The Wizard of Oz).

Still, investors may look past a modest profit powered by General Electric's industrial businesses if they feel last month's assurances of GE Capital's health were hollow. If they're satisfied, however, GE may earn one of the few things it can't manufacture: enhanced credibility.
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